You're wholly mistaken here. As usual, any discussion about copyright ends up mired down in wishful thinking. There's no point arguing on the basis on what you wish might be true, that doesn't help anyone.

Copyright law says you can't make a copy of a copyrighted work. You can't get clearer than that. The exceptions to this prohibition are few and limited, and none of them apply here.

The MP3.com case is directly applicable. Here is the core of the judgement, and it has nothing to do with the incidental properties of the offence: "in actuality defendant is re-playing for the subscribers converted versions of the recordings it copied, without authorization, from plaintiffs' copyrighted CDs. On its face, this makes out a presumptive case of infringement"

Making copies of a copyrighted work is an infringement. It simply does not matter where the company gets the source material that it's copying (though if that source is illegal that would certainly be an aggravation). And it does not matter whether they distribute that copy through the internet, by sending you a disc with the file on it, or by photographing it on microfilm and flying it to you by carrier pigeon.

They are making copies
1) on a commercial basis
2) of the entirety of the work
3) which may directly compete with legal electronic copies which the rights-holder may wish to place on the market.
So it fails on three of the four Fair Use factors right out of the gate and the lack of any transformation of the work (such as parody) rules out any variation of that.

There are areas where a third party can legally format-shift a copy for you, and they're written into the statute. If these people were advertising services to convert books so they could be read by the blind (and complied with the other provisions), then they'd be OK. But there's no mention of that on their site. This is just someone out to make a quick buck who has got away with it in Japan.